Regulatory Updates #35: RBI on demonetisation, SEBI on IFSC & more

Bar & Bench will bring you the latest regulatory and policy updates from different ministries and regulatory authorities. In the this edition of the Bar & Bench Regulatory Updates, we analyse the latest updates by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).

RBI

Rules relating to withdrawal, exchange and use of demonetised currency

The RBI has issued several notifications since the first one issued on 8 November, following which ₹ 500 & 1000 notes ceased to be legal tender. These notifications appear to be a periodical response to the unanticipated chaos that is being caused due to demonetisation of the high value currency in question.

  • On 13 November [pdf], the daily limits on withdrawal was increased from ₹ 2000 to ₹ 2500 and exchange was increased from ₹ 4000 to₹ 4500;
  • On 14 November [pdf], the weekly withdrawal limit for current account holders was increased to ₹ 50,000;
  • On 21 November [pdf], The withdrawal limits for expenses related to weddings scheduled before 30th December were increased to ₹ 2,50,000;
  • On 28 November [pdf], the withdrawal limits were further relaxed “to allow withdrawals of deposits made in current legal tender notes on or after November 29, 2016 beyond the current limit”. A problematic relaxation though – it only relaxes withdrawal limit to the extent the amount deposited in banks since demonetisation was in ‘current legal tender’. Why would someone deposit this scarce commodity in bank?

Changes to Capital Reserve Ratio

The RBI had said [pdf] banks have to maintain an incremental 100 per cent CRR  for the  deposits they had received between September 16 and November 11, while clarifying the overall CRR requirement stayed at four per cent.

Following this move, banks are upset to the extent that they don’t make any interest on CRR and the lending rates will expectedly not be lowered.

[Read more at Livemint]

SEBI

SEBI issues new disclosure norms for InvITs

SEBI has prescribed new disclosure norms [pdf] for infrastructure investment trusts (InvITs), under which such InvITs have to inform stock exchanges about utilisation of the funds raised by them in the market.

These disclosures are to be made on a continuous basis to the stock exchange(s) where its units are listed. The said disclosures, inter alia, include disclosures for financial as well as non-financial information.

InvITs will also have to give details of the fees paid to investment and project managers as also share details about the methodology for computation.

[Read more at domain-b]

SEBI issues new framework for  IFSC

SEBI has issued a new framework [pdf] for functioning of stock exchanges and clearing corporations that are setting up their operations in international financial services centres (IFSCs).

SEBI has allowed exchanges to launch all exchange-traded products that are currently allowed in a recognized jurisdiction, subject to prior approval of the market watchdog. However, agricultural derivatives have not been permitted to trade in Gujarat International Financial Tec-City. SEBI has given the exchanges’ freedom to select trading hours for different product categories and position limits.

[Read more at Business Standard]

SEBI notifies new norms for REITs and InvITs

SEBI had notified the Real Estate Investment Trusts (REITs) [pdf] and InvIT [pdf] Regulations in 2014, allowing setting up of and listing of such trusts, which are very popular in some advanced markets.

To facilitate growth of REITs and InvITs, the board of SEBI had approved relaxations to existing norms in September after extensive public consultations.

The new provisions, inter alia, include allowing REITs and InvITs to invest in two-level (special purpose vehicle, SPV) structure through holding company. This is subject to sufficient shareholding in the holding company and the underlying SPV.

[Read more at Business Standard]